The Effects of Socially Responsible Dimensions

on Risk Dynamics and Risk Predictability:

A Value-at-Risk Perspective
Les effets des dimensions socialement responsables sur la
dynamique et la prédictibilité des risques : une approche
Value-at-Risk
Los efectos de las dimensiones socialmente responsables sobre
la dinámica y la previsibilidad de los riesgos: un enfoque de
Value-at-Risk
JEAN-LAURENT VIVIANI MALICK FALL CHRISTOPHE REVELLI
CREM, IGR-IAE de Rennes, CREM, IGR-IAE de Rennes, Kedge Business School
Pour citer cet article : Viviani, J.l. ; Fall, M. & Revelli, C. (2018). The Effects of Socially Responsible Dimensions on Risk Dynamics

Pour citer cet article : Viviani, J.l. ; Fall, M. & Revelli, C. (2018). The Effects of Socially Responsible Dimensions on Risk Dynamics
University of Rennes 1 University of Rennes 1

ABSTRACT RÉSUMÉ RESUMEN

Using a Value-at-Risk (VaR) approach and
a sample of 2082 stocks on the 2004-2015
period, we measure the impact of SR dimen-
sions (measured by Vigeo ratings) on the risk
level and the risk dynamic of stock returns
and on their risk predictability. We conclude
that good overall socially responsible (SR)
ratings reduce the downside risk level of
and Risk Predictability: A Value-at-Risk Perspective. Management international, 23(3), 141-157.
En utilisant une approche par la Value-at-
Risk (VaR) et un échantillon de 2082 actions
sur la période 2004-2015, nous mesurons
l’impact des dimensions socialement res-
ponsables (mesurées par les ratings Vigeo)
sur le niveau de risque et la dynamique des
risques des rentabilités d’action, ainsi que
leur prédictibilité du risque. Nous concluons
Usando un enfoque de Value-at-Risk (VaR) y
una muestra de 2.082 acciones durante 2004-
2015, medimos el impacto de las dimen-
siones socialmente responsables (medidas
con Vigeo ratings) en el nivel de riesgo y la
dinámica de los riesgos de la rentabilidad
de la acción, así como su predictibilidad
del riesgo. Concluimos que la calificación

and Risk Predictability: A Value-at-Risk Perspective. Management international, 23(3), 141-157.

stock returns. We find also that high-rated
companies in HR (Human Resources), ENV
(Environment), BB (Business Behaviour),
CIN (Community Involvement), and HRTS
(Human Rights at Workplaces) dimensions
better absorb volatility shocks.
Keywords: Social Ratings, GARCH,
Predictability Risk, Times Series Models,
Value-at-Risk (VaR)
que le rating global RSE réduit le risque
downside de la rentabilité des titres. Nous
trouvons également que les entreprises bien
notées dans les dimensions HR (Ressources
Humaines), ENV (Environnement), BB
(Comportement sur les Marchés), CIN
(Engagement Communautaire), and HRTS
(Droits Humains au Travail) absorbent
mieux les chocs de volatilité.
Mots-Clés : Ratings sociaux, GARCH, pré-
dictibilité du risque, Modèles Time Series,
Value-at-Risk (Var)
general de CSR reduce el riesgo « down-
side ». También pensamos que las compa-
ñías que están altamente calificadas en HR
(Recursos Humanos), ENV (Ambiente), BB
(Comportamiento en los Mercados), CIN
(Compromiso con la Comunidad) y HRTS
(Derechos Humanos en el Trabajo) absorben
mejor las crisis de volatilidad.
Palabras Clave: Clasificaciones sociales,
GARCH, Previsibilidad del riesgo, Modelos
Time Series, Value-at-Risk (Var)

N umerous studies investigate the relationship between

socially responsible (SR) dimensions or practices and
company risk at both the theoretical and empirical level. Theor-
etically, due to better balancing the interests of the various stake-
holders (Mishra and Modi, 2013), greater reputation (Godfrey
et al., 2005) and less information asymmetry (Lahrech, 2011),
companies with higher SR practices should be less risky and more
resilient in times of crisis. However, as the risk measures (total
risk, systematic risk and idiosyncratic risk), methodologies (for
instance, measures of the various dimensions of social respons-
ibility) and samples are heterogeneous, extant empirical studies
do not provide clear evidence of these claims. Nonetheless,
such studies suggest a slightly negative relationship between SR
scores or ratings and financial risk measured as total risk (Jo and
Na, 2012; Kim, 2010), idiosyncratic risk (Boutin-Dufresne and
Savaria, 2004; Mishra and Modi, 2013; Bouslah et al., 2013) and
systematic risk (Jo and Na, 2012; Kim, 2010).
Due to regulatory constraints (Basel 2-3) and equity opti-
mization in banks, portfolio and risk managers use specific risk
measures (namely, Value-at-Risk and Conditional Value-at-Risk
measuring downside risk) but the effect of SR dimensions on
these measures has to date only been partially investigated
(Benlemlih and Girerd-Potin, 2014). Moreover, the question
of how SR dimensions can improve the predictability of these
measures remains unanswered. More specifically, we wonder if
142 Management international / International Management / Gestión Internacional
risk managers can use past returns, some characteristics of the
company (size, leverage and CSR performance) to predict the
mean and volatility of stock returns (mean and volatility are
the two central parameters used to compute the Value-at-Risk).
We are searching for a model specification and an information
set (including SR ratings) among the set of models believed to
be capable to predict expected returns and volatility1. Contrary
to most studies on the relationship between SR dimensions and
company risk, empirical studies in financial risk management
often use GARCH like time series models in order to tend to
account for several stylized facts (volatility clustering and
leverage effect). Technically, risk measures are often predicted
using an econometric times series model in the GARCH family.
These kinds of measures permit to investigate the effect of SR
dimensions on the time series properties of stock return vola-
tility, even if not dealt in the literature until now.
In the present paper, we not only investigate the relation-
ship between social rating and market risk level but also the
risk dynamics and the risk predictability to assert whether the
social rating can be used as an additional indicator of risk. We
measure market risk levels by Value-at-Risk (VaR) while the risk
dynamics are given by the parameters of a GARCH model. We
then measure market risk predictability by observing how well
standard parametric VaR modelling predicts extreme returns.
Predictability is of practical interest for risk managers because if
SR ratings help to better predict stock returns volatility, they could
be introduced as valuable risk factors in risk prediction models.
We conclude of our empirical study using Vigeo ratings
that in terms of the estimated risk characteristics, good overall
SR ratings reduce the downside risk level (measured by VaR)
and soften the volatility movements. When we decompose the
results by SR dimensions, we find that high-rated companies
in HR (Human Resources), ENV (Environment), BB (Business
Behaviour), CIN (Community Involvement), and HRTS (Human
Rights at Workplaces) dimensions better absorb volatility
shocks than low-rated companies in the same dimension.
Unfortunately, concerning the risk predictability, we do not
find that SR ratings help to improve the prediction quality of
stock return risk (measured by VaR)2.
These results have interesting theoretical and managerial
implications. From a theoretical viewpoint, to the authors’
knowledge, this paper is one of the first to investigate the SR
dimensions-risk relationship measured by VaR while also meas-
uring the impact of these dimensions on the risk dynamics of
stock returns and risk predictability using a large international
sample and sophisticated econometric models. From a manag-
erial viewpoint, this research provides portfolio managers with
the possibility of considering good SR practices (by dimensions)
to reduce the ‘risk-VaR’ of their portfolios and the effect of
negative returns on volatility while improving their capacity
to soften the volatility movements of their portfolios.
The remainder of the paper is structured as follows. We first
provide the theoretical foundations of the relationship between
SR practices and company risk and review the empirical evidence
1. We consider predictability (Goodwin & Wright, 2010) as the capability of forecasters to produce a well-calibrated probability distribution. Perfect calibration
would be achieved, for example, if it is observed that stock returns are higher than the VaR99%, 1% of the days.
2. Our results of course depends on the time series model we used (classical GARCH and GJR model). It could be the case that SR ratings be useful in predicting
risk if risk managers use other risk prediction models.
of this relationship (sections 2 and 3). We then introduce our
method and sample (section 4), present our empirical results
(section 5) and end with our conclusions.
Theoretical Foundations of SR Dimensions
or Practices and Company Risk
Some arguments developed in literature explain the relationship
between social performance and financial risk (for a review, see
Benlemlih and Girerd-Potin, 2014 and Kim et al. 2014). The impact
of SR commitment on company risk has generated a theoretical
debate between stakeholder theory and the more traditional
stockholder governance approach. The debate could be seen
under two prisms: the impact of SR dimensions on downside
risk (reduce or increase the potential loss or negative risk) and on
upside risk (reduce or increase the potential gain or positive risk).
The impact of SR commitment on downside risk
The impact of SR commitment on the intangible capital and
the company risk
A first dimension of the debate is the answer to the follow-
ing question: Does SR commitment increase or decrease the
intangible capital of the firm? Intangible capital has a strong
link with company risk because as for the traditional equity
capital, relational and reputation capital can be seen as a buffer
protecting the company against risk. According to Fombrun
et al. (2000), “reputational capital safeguards the existing assets
of the firm, serving as a buffer against losses”.
Stakeholder theory (Freeman, 1984) suggests that managers
should balance the interests of shareholders, employees, custom-
ers and the community to ensure the organization’s survival.
Indeed, achieving the organization’s objectives may depend on
the interests of different stakeholders. Good SR practices reduce
the risk of losing the support of one or more stakeholders. This
leads to avoiding punitive measures that could otherwise result
in decisions that have a negative effect on stakeholder interests.
By developing good environmental, product and commercial
practices, workplace quality of life, investor trust and other
intangible advantages, SR companies will thus benefit from the
lesser likelihood of legal actions resulting in financial penalties,
higher employee loyalty and stronger customer trust (Boutin-
Dufresne and Savaria, 2004).
Moreover, by increasing social performance and meeting
stakeholder expectations, companies preserve and develop
their reputation. Reputation is an important intangible asset
affecting firm value and producing potential tangible benefits
(Godfrey et al., 2005). The impact of reputation on financial
performance is mainly due to insulation from negative financial
performance. Participating in some types of SR activities leads
to a form of goodwill or moral capital (Godfrey et al., 2005)
that protect many of the firm’s relationship-based intangible
assets, providing shareholders with insurance-like protection
and contributing to shareholder wealth.
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective
However, following the classical governance theory, SR
commitment has a negative effect on relational or intangible
capital because adoption of SR strategies could exacerbate the
agency problem between managers and shareholders or stake-
holders (Friedman, 1970). This SR engagement could be seen as
a way to enlarge managerial discretion without corresponding
enlargement of control. Managerial discretion deteriorates into
self-interested opportunism risky to investors (Windsor, 2006).
The impact of SR commitment on the company’s efficiency
and risk
The second dimension of the debate is the impact of SR adoption
on companies’ efficiency. Following the stakeholder theory, high
quality relationships with stakeholders have a positive effect on
risk management by reducing uncertainty in the market place,
creating controls that minimize or eliminate disruption, loss
or damage to business operations, and reduce the impact of an
undesirable event on the business (Kytle and Ruggie, 2005).
More specifically, SR practices adoption and compliance with
environmental and social issues improve the firm’s ability to
control and reduce environmental and other risks such as damage
to brand image, reputation and trust, consumer boycotts, high
exposures to fines, penalties and punitive damages.
In the corporate governance perspective, adoption of SR
strategies can increase risk because it deteriorates the competitive
advantage of the company by diverting resources towards less
or non-profitable activities (MacWilliams and Siegel, 2001) or
by degrading the quality of decisions due to multi-objectives
function (Jensen, 2001).
The impact of SR commitment on information asymmetry
and company risk
The third dimension of the debate is on the impact of SR commit-
ment on information asymmetry. Less information asymmetry
and high information quality in business decisions also have the
effect to reduce the risk perceived by investors and more gener-
ally by stakeholders (Lahrech, 2011). SR adoption should lead
company to be more transparent and to disclose more reliable
information to stakeholders. Several empirical studies illustrate
the positive impact of SR adoption on the quality of information
disclosure (Choi and Pae, 2011; Martínez-Ferrero et al., 2015).
Nevertheless, following the second explanation, adoption of SR
strategies could help managers to hide bad information (Jin and
Myers, 2006) and bad behaviour (Hemingway and Maclagan,
2004). More specifically, SR activities can be used by manager
to manipulate earnings (Prior et al. 2008) or to disguise the real
value of a company’s assets (Zahra et al., 2005). As stated by
Kim et al. (2014: 2), “if firms use CSR as a tool to disguise bad
news and divert shareholder scrutiny, CSR would be associated
with higher, not lower, stock price crash risk.”.
The impact of SR commitment on upside risk
All the previous explanations emphasis on the impact of SR
adoption on downside risk (does it increase or not the risk of
losses) but SR adoption could also have an impact on upside
risk (possibility to decrease or increase the potential gain).
3. The emergence of the French SRI and TEEC Labels could be good examples of SR investors engaged in sustainable development asset management strategies
and favoring the development of SR companies from economic and market point of views.
143
As every innovative process, adoption of SR strategies could
generate new business opportunities. For instance, the com-
pany embodies its products with SR attributes but if customers
could not enjoy these new attributes and be willing to pay for
them, this strategy decreases the upside potential (upside risk)
of the company (MacWilliams and Siegel, 2001). All initiatives
considered to be socially responsible will distance leaders from
their purported goal of maximizing profit (Aupperle et al.,
1985). Preston and O’Bannon (1997: 421) talk about “trade-off
hypothesis”, where SR activities “may siphon off capital and other
resources from the firm, putting it at a relative disadvantage
compared to firms that are less socially active.”.
In the other side, SR commitment can also be a vector of
growth in sales and profitability (increases upside risk). SR
practices could be viewed as a real opportunity of growth for
companies if we integrate that many investors or consumers
are ethical-focused and mainly interested in the quest for an
ethical value rather than a financial value (Arvidsson, 2009). For
instance, all the different issues around climate change and the
new regulations (Paris Agreement, Carbon Disclosure Project,
Montreal Pledge…) could act as real business opportunities for
companies in developing SR strategies. This argument is linked
to the social impact theory of Preston and O’Bannon (1997),
for whom external reputation and social expertise develop eco-
nomic and financial performance in creating competitiveness
and differentiation. All these arguments are online with the
stakeholder theory of Freeman (1984) where the success of a
company is materialized when good relationships are maintained
and developed with stakeholders (either internal or external).
Finally, the link between the systematic and idiosyncratic
risk can be made in explaining how SR commitments attract
SR investors on the market who are willing to pay more for this.
Beltratti (2003) explains that the effect of ethical or socially
responsible investing on stock prices is weak until the share
of SR investors is reduced. However, as stated by Dupré et al.
(2009), when this share is growing, SR stocks prices increase, as
SR investors are willing to pay more and make a financial sacri-
fice to satisfy their SR positioning and requirement. Possibilities
to generate market positive returns for SR investors is thus
existing. As a consequence and a positive event for companies,
the equity cost decreases for companies that demonstrate SR
commitments and procure them a competitive advantage com-
pared to non-SR companies by a reducing their funding rate
and thus a better control of their financial risk (idiosyncratic
risk). The innovation proposed by SR companies offer them the
possibility to benefit from the capital of new investors identified
as socially responsible. The role of SR funds is to identify and
invest into SR companies and offer them the possibility to fund
their growth opportunities. The specific market of SR investing
(SRI), favoured by regulation and transformation of business
models of investors considering the sustainable issues, permits
to link SR companies and SR investors and thus to amplify
positive events specific to the firm3.
Finally, our arguments in the specific paragraph on upside risk
try to demonstrate that SR companies have the possibility (but it
is not sure) to obtain high positive returns (new opportunities,
144 Management international / International Management / Gestión Internacional
businesses, innovation, differentiation)4. We suppose that, due
to better relationship with all the stakeholders, better reputation
and a more sustainable business, the SR companies will suffer
less of negative shocks (either idiosyncratic such as scandals,
business disruptions… or systematic, for instance an increase
of oil prices) and benefit more of positive shocks (either idiosyn-
cratic or systematic) by attracting more quickly and efficiently
the resources that are necessary for their growth. Consequently,
the payoffs of SR companies should be closer to call option like
payoffs than other companies.
Empirical Evidence of SR Dimensions
or Practices and Company Risk
This section presents a literature review of the impact of SR
dimensions on various measures of risk: total risk, systematic
risk (theoretically rewarded by the market) and idiosyncratic
risk (theoretically not rewarded by the market5). We isolate the
few studies on downside risk as these constitute the measures
used in this paper.
Total, idiosyncratic and systematic risk
Some empirical studies examine the relationship between SR
dimensions or practices and financial risk through components
of total risk (measured by variance or standard deviation of
stock returns), systematic risk (or market risk) or specific risk
(or idiosyncratic risk).
Using a meta-analysis, Orlitzky and Benjamin (2001) recon-
sider various empirical studies addressing the link between social
performance and financial risk in the US between 1978 and 1995.
Their results support the existence of a negative relationship
between these two variables. More recently, Jo and Na (2012)
and Kim (2010) studied the relationship between SR practices
of companies and firm total risk using respectively KLD data
and The Business Ethics 100 Best Corporate Citizens in the
American market. Jo and Na (2012) conclude that firm total risk
is negatively related to SR engagement. The reasons why empir-
ical literature yields few significant relations between SRI and
expected returns are noted and may be due to the aggregation
of different dimensions that have contrasting effects (Scholtens
and Zhou, 2008). This therefore requires investigating different
dimensions of social responsibility. Kim’s (2010: 205) results
illustrate this point: “composite CSR” measures show a positive
effect while some individual “components of CSR” measured with
the business ethics score show a negative effect on total firm risk.
In terms of idiosyncratic risk, the results of empirical stud-
ies do not provide clear evidence on the negative effect of SR
dimensions or practices. Most studies find a negative relation-
ship with firm idiosyncratic risk (Boutin-Dufresne and Savaria,
2004; Mishra and Modi, 2013), yet Humphrey et al. (2012) and
Kim (2010) find no evidence. Finally, Bouslah et al. (2013) focus
on individual components of social performance and find that
idiosyncratic risk is negatively related to employee relations and
human rights, while other SR components do not affect financial
4. To illustrate, we can take the example of electric and classical carmakers that could have similar volatilities (being in the same industry…) but the upside
potential of electric could probably be higher (so the kurtosis).
5. There is a debate on the impact of idiosyncratic risk on expected return since the seminal paper of Goyal and Santa-Clara (2003).
6. Kinder, Lydenberg, Domini Research & Analytics (today owned by MSCI ESG Research).
risk. This study supports the notion that not all SR dimensions
are relevant in evaluating a company’s risk.
SR engagement also has an effect on systematic risk. Studies
on the US markets (Jo and Na, 2012; Kim, 2010) find that cor-
porate social performance is negatively related to systematic
risk. However, Oikonomou et al. (2012) show that individual
KLD6 strength components are negatively but insignificantly
related to systematic risk while three out of five individual social
concerns (community, employment and environment) have a
positive and significant effect. Salama et al. (2011), focusing on
environmental responsibility using a sample of UK firms, find
that the environmental performance of these firms is inversely
related to systematic risk.
From a general viewpoint, extant literature suggests there is
a slight negative relationship between SR dimensions or ratings
of companies and the different measures of financial risk (stock
volatility, idiosyncratic risk and systematic risk).
Downside risk
Few studies analyse the impact of SR ratings on downside risk
measures. Nofsinger and Varma (2014) show that SRI funds
perform better during bear markets as their attributes dampen
downside risk. Oikonomou et al. (2012) show no significant
effect of KLD ratings on financial risk when using the Bawa
and Lindenberg beta downside risk measure, while their Har-
low and Rao beta results analysis shows a positive relationship
between downside risk and some individual components of social
irresponsibility (community concerns, employee relation con-
cerns and environmental performance concerns). Benlemlih and
Girerd-Potin (2014) use ‘Value-at-Risk’ (VaR) and ‘Conditional
VaR’ (CVaR) measures of downside risk and find that portfolios
with high social responsibility scores are less risky than port-
folios with low social responsibility scores. Finally, the study of
Kim et al. (2014) supports the mitigating effect of CSR on crash
risk defined as the conditional skewness of return distribution.
Methodology and sample
Value-At-Risk Methodology
We use the Value-at-Risk framework to assess stock market risk.
In recent years, the tremendous growth in trading activity and the
widely publicized trading losses of well-known financial institu-
tions have led financial regulators and supervisory authorities to
favour quantitative techniques that appraise the possible losses
that these institutions may incur. Value-at-Risk has become
one of the most widely used techniques as it provides a simple
answer to the following question: with a given probability (say
α), what is my predicted financial loss over a given time horizon?
The answer is the VaR at level α, which gives an amount in the
currency of the traded assets (in dollar terms for example) and
is thus easily understandable. VaR has a simple statistical defin-
ition: the VaR at level α for a sample of returns is defined as the
corresponding empirical quantile at %. The quantile definition
 The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective 145

implies that with probability 1 -α the returns will be larger than ahead the future mean and variance process allowing the
the VaR. In other words, with probability 1 -α, the losses will authors to compute ex-ante the one-day ahead VaR (long and
Formally, the conditional
be smaller VaR
than the(for a long
dollar position)
amount canby
given bethe
defined
VaR.as:
From an short positions).
empirical point of view, computing the VaR for a collection of The procedure can be summarized as follow:
returns Pr thus
𝑟𝑟! <requires
−𝑉𝑉𝑉𝑉𝑉𝑉!|!!! 𝛼𝛼 = 𝛼𝛼 the
computing ∀ 𝑡𝑡 ∈ ℤ quantile at level (1)
, empirical
α of the distribution of the returns of the portfolio. 1. Starting with an initial sample of five years of data, for each
series we calibrate the model and predict the following day’s
Formally, the conditional VaR (for a long position) can be (t+1) conditional mean ( yt ) and variance process (σt2 ).
^ ^

defined as:
MODELLING THE STOCK RETURNS PROCESS 2. Moving to one day ahead, we observe the realized values (σt2, yt )
∀ t ∈ Z(1)
^
and compare this with the predicted values (σt2 ,  yt ) and store
^
Pr[rt< − VaRt|t−1 (α)] = α ,
the result. We then add this day in the estimation sample
The necessary elements to compute VaR are the volatility and mean of the returns process. We
and predict the following day’s mean and variance values.
Modelling the stock returns process
consider a collection of daily log returns (in %), 𝑦𝑦! = 100 𝑙𝑙𝑙𝑙𝑙𝑙 (𝑝𝑝! ) − 𝑙𝑙𝑙𝑙𝑙𝑙 3. We
(𝑝𝑝!!! ) repeat
where the second step until we reach the end of the
The necessary elements to compute VaR are the volatility and sample andquality
updateofthe
statistical
of daily significance for the themodel calibrationThese
VaR estimation. (parameters
results andare the VaR
𝑡𝑡 = 1, … 𝑇𝑇mean
and 𝑝𝑝of the returns process. We consider a collection
! is the stock price at time t. We rely on the ARMA-GARCH and the ARMA-via maximum likelihood estimation) every 50 days.
estimated
log returns (in %), yt = 100[log (pt ) − log (pt−1)] where t = 1,…T and
parameters are stored
GJR model pt istothe stock price
forecast at time
the mean andt. We rely onprocess,
variance The ‘ARMA’ part 4.
the ARMA-GARCH Weannually
forecastsobserve per stock and used later on in7 the panel data analysis.
the the number of violations for both the long and
and the ARMA-GJR model to forecast the mean and variance
In addition
short positions and deduct the theoretical annual VaR based
to the standard long VaR computation, we also consider the short VaR as in Giot and
conditionalprocess,
mean process (𝜇𝜇) while the ‘GJR’ part forecasts the
The ‘ARMA’ part forecasts the conditional mean processconditional variance on the
process conditional
(𝜎𝜎! ). mean and variance process. We then derive
Laurent
(μ) while the ‘GJR’ part forecasts the conditional variance process (2003). The statistical
long side of significance
the daily VaRfor the quality
is defined of VaR
as the the VaR
levelestimation.
for traders with long
The ARMA orders (p,q) are determined by minimizing the Akaike information criterion These with
results and the VaR parameters are stored annually
(σt). The ARMA orders (p,q) are determined by minimizing the
positions in the relevant per stocks,
stock which
and usedis later
the ‘usual’
on in VaR
the where
panel datatraders incur losses when
analysis.
Akaike
p,q=0:1 (four information
combinations). criterion with
Accordingly, p,q=0: 1 (four
the conditional combinations).
mean process equation is:
Accordingly, the conditional mean process equation is: returns are observed.
negative In addition to the standard
Correspondingly, long side
the short VaRofcomputation,
the daily VaRwe is also
the VaR level
∅ 𝐿𝐿 𝑦𝑦! = 𝑢𝑢 + 𝜃𝜃 𝐿𝐿 𝜀𝜀! (2) consider the short VaR as in Giot and Laurent (2003). The long
∅(L) yt = u + θ(L)εt(2) for traders with short sidepositions,
of the daily i.e.,VaR is defined
traders incurringas the VaRwhen
losses level stock
for traders
priceswith
increase. The
where ∅ 𝐿𝐿 , 𝜃𝜃 𝐿𝐿 are polynomials in the lag operator of order 𝑝𝑝, 𝑞𝑞 respectively,long withpositions
all their in the relevant stocks, which is the ‘usual’ VaR
where ∅(L) , θ(L) are polynomials in the lag operator of order
model’s ability to predict long VaR
where traders thuslosses
incur relates to itsnegative
when ability to modelare
returns large negative returns,
observed.
roots lyingp, q respectively,
outside with all
the unit circle, andtheir
𝐿𝐿 is roots lying
the lag outside the unit circle,
operator.
Correspondingly, the short side of the daily VaR is the VaR level
and L is the lag operator. while its performance regarding the short side of VaR is based on its ability to take into account
To model the conditional variance process, we use the classical GARCH and thefor GJRtraders
Models with short positions, i.e., traders incurring losses
To model the conditional variance process, welarge use the clas-returns.
positive when stock prices increase. The model’s ability to predict long
sicalmodelling
(which allows GARCH asymmetric
and the GJRvolatility
Modelsclustering).
(which allows
The modelling
conditional varianceVaRprocess
thus relates
is to its ability to model large negative returns,
asymmetric volatility clustering). The conditional For the normal GARCH
variance whilemodel, the VaR for regarding
its performance long and short the positions
short sideis of
given
VaRby: is based
defined as:process is defined as: on its ability to take into account large positive returns.
Long VaR: 𝑢𝑢! + 𝑁𝑁!, 𝜎𝜎! (4)
! !"# ! !"# ! ! ! !"# ! For the normal GARCH model, the VaR for long and short
𝜎𝜎!! = 𝑤𝑤 + !!!(𝛼𝛼! 𝜀𝜀!!! + 𝛾𝛾! 𝑆𝑆!!! 𝜀𝜀!!! ) + !!!(𝛽𝛽! 𝜎𝜎!!! ) (3) (3)
positions is given
Short VaR:by: 𝑢𝑢! + 𝑁𝑁!!!, 𝜎𝜎! (5)
!
where 𝑆𝑆!!! is awhere
dummySt−1variable
is a dummy
–
variable
that takes the that takes
value the value
1 when 1 when εand
𝜀𝜀! is negative t This u  + Nα, σt
Long VaR:
0 otherwise. (4)
is negative and 0 otherwise. This term (specific to thewhere 𝑁𝑁! (𝑁𝑁!!! 𝜎𝜎! ) is the left (right) tquantile
GJR model) at α% for the normal and 𝑢𝑢! and 𝜎𝜎! are respectively
permits
term (specific to thethe
GJReffect shock εthe
of a permits
model) 2
oneffect
the conditional !
of a shock 𝜀𝜀!variance σt2
on the conditional variance 𝜎𝜎!! ut + N1-α, σt
Short VaR: (5)
t the conditional mean and conditional variance at time t. We set α to the value 0.05.
to differ when the shock on returns is positive or negative. This where Nα (N1-α σt) is s the left (right) quantile at α% for the
to differ when the shock
asymmetric on returns
effect is positive
in financial series isorwidely
negative. This asymmetric
documented: vola- effect in financial
normal and ut and σt are respectively the conditional mean
EVALUATION
tility increases by a greater amount following negative shocks OF THE QUALITY OF THE VAR ESTIMATION
shocks variance at time t. We set α to the value 0.05.
and conditional
series is widely documented: volatility increases by a greater amount following negative
and is often associated with the ‘leverage effect’ whereby a firm’s
debt-to-equity ratio increases when equity valuesOur decline,
aim isand
to evaluate to which extent the VaR methodology
Evaluation of the quality of theaccurately predicts extreme returns
VaR estimation
equity holders perceive the firm’s future income streams as more
risky (Black, 1976). The GARCH model is a restricted Our aim is
version this accuracy
and whether is to evaluate
linked to which
to social extent
ratings. Wethe VaRfocus
thus methodology
on so-called ‘VaR
of the GJR model, with γ = 0. We set the order of lag to be (1,1) accurately predicts extreme returns and whether this accuracy
for all variance models. is linked
violations’. The expected to social
number ratings.
of violations We thus
depends focus
on the on so-called
confidence ‘VaR
level, Let 𝐼𝐼! (𝛼𝛼) denote
violations’. The expected number of violations depends on the
In the present paper, we adopt an out-of-sample method- variable
the exception associatedlevel,
confidence with Let
the ex-post observation
It (α) denote of an α%variable
the exception asso- at time t
VaR exception
ology to compute VaR, which entails an iterative procedure ciated with the ex-post observation of an α% VaR exception at
where forecasts are made as in ‘real’ conditions, meaning
for a longthat
position case, 𝐼𝐼! (𝛼𝛼) is then defined as:
time t for a long position case, It (α) is then defined as:
the estimation part that calibrates the model does not include
observations of the forecast period but is updated daily in the 1 𝑖𝑖𝑖𝑖 𝑟𝑟! < −𝑉𝑉𝑉𝑉𝑉𝑉(𝛼𝛼)!|!!!
𝐼𝐼! 𝛼𝛼 =  (6) (6)
same way practitioners do. The estimation part is based on a 0 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒
minimum of five years of data regularly updated with the most VaR forecasts are valid if and only if the violation pro-
recent days. This out-of-sample methodology is coupled with cess satisfies the Unconditional Coverage Property and the
an update of the econometrical model every 50 trading days. Independence Property (Christoffersen, 1998). We rely on
Calibrated (to the data) models are used to predict one-day the most distinguished Dynamic Quantile Test of Engle and

7. A violation occurs when the returns are lower (higher) than VaR for the long position (short position).
ditions are satisfied, i.e., that the frequency of exceptions is consistent with the

ber of violations
146 (Unconditional Coverage Property) and that violations are international / International Management / Gestión Internacional
Management

distributed (Independence Property).

Manganelli (2004) to jointly test whether these two conditions ‘Community Relations’, ‘Corporate Governance’, ‘Diversity’,
are satisfied, i.e., that the frequency of exceptions is consistent Employee Relations’, Environment’, ‘Product’ and ‘Human Rights’
Quantile is based on a simple linear regression that links the violations to the
with the expected number of violations (Unconditional Coverage (rated on strengths and concerns for each dimension when the
Property) and that violations are independently distributed
ons. Violations are represented by the Hit variable defined as follows (for long rating provided by Vigeo is for a date, for a sector and for each
(Independence Property). dimension and sub-dimension). As the methodology of KLD
The Dynamic Quantile is based on a simple linear regression and Vigeo totally differ, ratings will automatically be different.
that links the violations to the lagged violations. Violations To rate a company, Vigeo uses two types of scales: ‘Vigeo
are𝐻𝐻𝐻𝐻𝐻𝐻 ! 𝛼𝛼 = 𝐼𝐼!by
represented 𝛼𝛼the
− Hit
α variable defined
(7) as follows (for long scores’ and ‘Vigeo ratings’. Vigeo scores consist to attribute a
position VaR): score to a company between 0 for the least socially responsible
le takes values 1 − 𝛼𝛼 every time 𝑟𝑟! < −𝑉𝑉𝑉𝑉𝑉𝑉 and −𝛼𝛼 otherwise. The intuition isfirms as to 100 for the most responsible firms (the score provided
Hitt(α) = It (α) − α (7) is not relative to the sector). Vigeo ratings consists to provide a
intercept of the regression is null, it indicates that the Unconditional Coverage score to a company relative to its sector on five levels: --; -; =; +
The Hit variable takes values 1 − α every time rt < −VaR
or ++. We decide to use ‘Vigeo ratings’ in our study to be sure
lfilled (𝐸𝐸(𝐻𝐻𝐻𝐻𝐻𝐻and
! ) =− α0),otherwise. Theifintuition
additionally is as follow:(of
all the coefficients if the
the intercept
lagged Hits) are
that companies are rated relative to their sector.
of the regression is null, it indicates that the Unconditional
show that Coverage
there is Property
no correlation in the
is fulfilled Hitt) = 0),
(E(Hit sequences if allthat the Each rate is given a numerical value from 1 to 5, where 1
and then
additionally
the coefficients (of the lagged Hits) are also null this show that and 5 are respectively the extreme rates “--” and “++”. Thus,
property is also
therefulfilled. Engle andinManganelli
is no correlation (2004) and
the Hit sequences showthenthat,that
under
the the null
Vigeo ratings are treated as categorical variables.
Independence property is also fulfilled. Engle and Manganelli The daily returns obtained from Datastream from 1 January
adequate modelling,
(2004) show the Dynamic
that, underQuantile
the nullStatistic (see equation
hypothesis of adequate below)
mod-follows2000
a
until 31 December 2015 for all common shares with a
elling, the Dynamic Quantile Statistic (see equation below) Vigeo social rating resulted in a sample of 3523 companies
stribution. Thefollows
test statistic is givendistribution.
a Chi-Square by: The test statistic is given by: all of size and sectors. The following filters were then applied:
𝛽𝛽 ! 𝑋𝑋 ! 𝑋𝑋𝑋𝑋 – Datastream stocks with available prices
𝐷𝐷𝐷𝐷 = ∼ 𝜒𝜒 ! (𝑘𝑘) (8)
(8)
𝛼𝛼(1 − 𝛼𝛼) – Less than 10% missing data for each stock per year
where β is a vector composed of the regression coefficients – Stock with at least five consecutive years of data (a require-
vector composed of the regression coefficients on the lagged hits, X is the
on the lagged hits, X is the explanatory variable matrix (lagged ment for Value-at-Risk estimates).
hits) and k depends of the number of explanatory variables
ariable matrix (lagged hits) and k depends of the number of explanatory variables The final sample consisted of 2185 eligible companies rated
(number of lags). In our case, we include 5 lagged Hit variables
(for technical details, et al., 2012) by Vigeo and from which we can estimate the parameters of
gs). In our case, we include 5 see Dumitrescu
lagged Hit variables (forsotechnical
the matrix X
details, see
the time series models of stock returns. But considering that
corresponds to a matrix composed of 5 times-series of daily vio-
for some companies we have no possibility to match the data
al., 2012) solations (dummies
the matrix vector withtovalue 1
X corresponds if one
a matrix hit and 0ofotherwise)
composed 5 times-series of
based on the original Hit sequence but at 5 different lags. In the (for instance, for a given company, we can estimate the par-
following, ameters of the time series models for 2007-2008 but obtain the
s (dummies vector withwevalue
present
1 ifour
onetwo
hiteconometric panel based
and 0 otherwise) data models.
on the original
SR rating only for 2009), our final sample is thus composed of
2082 eligible companies.
Sample
Table 1a provides the summary statistics for each of the
We use Vigeo social ratings8 to measure the link between SR original ratings, size (measured by the Log of market value)
dimensions and financial risk. In other words, we want to test and leverage. We observe that mean and median values are
the influence of the social ratings of companies on their level close. The global score is around 31 (mean 31.84; median 31).
of risk. We consider Vigeo SR dimensions given that it is the Companies obtain the lowest score on the Human Resources
leading European agency and that it considers worldwide firms. dimension (mean 24.64; median 22) and the highest score on
The vast majority of empirical studies have used KLD (MSCI the dimension under intensive scrutiny of the investors i.e.
ESG Research today gathering KLD, Innovest and IRRC) rat- Corporate Governance (mean 41,53 median 43). From table
ings or databases to measure the link between SR ratings and 1b we observed that USA, Japan and UK represent respectively
financial performance or risk. The advantage to use Vigeo 18.9%, 16.87% and 11.34% of the total sample followed by
ratings is to provide new information on this relationship in Germany, France, Australia with about 3% each. Europe rep-
using data extracted and collected with another methodology resents majority of data considering that Vigeo is a European
and others dimensions of SR, with an objective to provide company. Note also that the number of ratings is increasing
new conclusions and new issues in a worldwide context when until 2009 (during the financial crisis) then decreases until 2012
KLD database provides only American data. Moreover, recent and finally increases again. Half of the ratings are measured
studies use Vigeo database (Girerd-Potin et al., 2014; Liang and from 2013 to 2015. Finally, we observe from figure 1 that the
Renneboog, 2016; Quéré et al., 2018). median scores of SR dimensions are globally decreasing over
Vigeo rates companies on six dimensions: ‘Environment’, time (between 2004 and 2016), certainly due to the increasing
‘Corporate Governance’, ‘Human Rights at workplaces’, ‘Human number of rated companies through time and thus the hetero-
Resources’, ‘Business Behaviour’ and ‘Community Involvement’9. geneous SR commitments of companies between emerging and
It differs from KLD dimensions based on seven themes: experienced markets on sustainable issues.

8. A merger between Vigeo and EIRIS (English social rating agency) was approved in October 2015 to form the Vigeo-EIRIS group.
9. The different criteria evaluated by Vigeo to establish the social ratings are explained in Appendix 1.
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective 147

Impact of SR dimensions on market risk
characteristics
Since the computation part is performed daily for individuals
stocks while storing the results at the annual frequency, we
obtain cross-sectional time series data. To unveil the relationship
between market risk and SR rating, we employ an (unbalanced)
panel data model. To distinguish also the use of empirical and
theoretical VaR, we precise that we use the empirical VaR as a
(raw) proxy to assess the market risk and the theoretical VaR
as a proxy (DQT Test) to assess the market risk predictability.
The static single equation model is given by:
where Yeart is a year dummy variable, β1 is the coefficient of
the Vigeo rate and β2 and β3 are control variable coefficients. The
dependent variable Y (riskit,) successively takes the following five
variables: the empirical Value at Risk for 1) Long and 2) Short
position, 3) the Leverage coefficient βiGJR, 4) the ARCH βiGJR
coefficient and 5) the GARCH parameters βiGJR of the conditional
variance process. We also estimate the model by replacing the
SR dimension by the overall rating as an explanatory variable.
This continuous variable differs of the other ratings variables
that are categorical variables. The overall rating is computed
as a weighted average of the six SR dimensions and expressed

risk i,t = X'i,t β + δt + ηi + vi,t
(9) TABLE 1a
t = 2004: 2015; i = 1: 2082
Summary statistics of Vigeo’s SR scores
where risk i,t is the dependent variable to determine (market
Vigeo scores Mean p25 Median p75 Std N
risk) with i denoting individuals and t denoting time, ηi and  δt
are respectively individual effects and time specific effects. Global score 31,84 23 31 40 12,04 6206
risk i,t represents risk measure or characteristics as described Human
24,64 14 22 33 14,64 6206
below, X i,t is an independent variable vector corresponding Resources (HR)
to the rating of one the 6 SR dimensions (HR, ENV, BB, CG, Environment
27,61 14 27 40 17,11 6206
CIN, HRTS) or the overall rating, 2 variables corresponding (ENV)
to firm’s characteristics (MV, Leverage), and a constant. β is Business
35,06 25 34 44 13,16 6206
Behaviour (BB)
an unknown coefficient associated to a SR dimension, ηi is a
Corporate
random variable possibly correlated with X'i,t (Fixed Effect) but 41,53 28 43 55 19,13 6206
Governance (CG)
uncorrelated with the error term vi,t.
Community
29,51 17 27 39 16,08 6206
MV and Leverage are, respectively, the market capitalization Involvement (CIN)
and leverage ratio (Total Debt /Capital). We include the leverage Human Rights at
34,13 24 32 43 13,51 6206
ratio to disentangle the financial leverage risk (captured per the workplaces (HRTS)
leverage ratio) from the business risk. Market capitalization is LN(MV) 17,73 15,73 17,176 19,638 2,63 6206
introduced to control the fact that small-caps stocks are riskier Leverage 0,3987 0,2212 0,3776 0,5470 0,2979 6206
investments than large-cap stocks.
This table summarizes the six Vigeo scores (Environment (ENV), Corporate
We estimate fixed effect model because we suspect omitted Governance (CG), Human Rights at workplaces (HRTS), Human Resources
(HR), Business Behaviour (BB) and Community Involvement (CIN). MV and
variables to be correlated with the explanatory variables (it is Leverage refer respectively to the ‘log of market capitalization’ and the
likely the case with the capitalization variable) and because ‘ratio of debt over total assets’.
observations can hardly be considered as being a random sam-
ple from the full population (over-representation of the USA).
Moreover, the Hausman (provided in Appendix 2) confirm
the superiority of the Fix estimator vs the Random Estimator. FIGURE 1
Evolution of median Vigeo SR scores
We consider the following dependent variables to evaluate
for each SR dimension
the relationship between SR dimensions and market risk:
– The empirical Value-at-Risk values computed as the 5%
50
quantile of returns on a yearly basis.
Overall
– The three parameters of the conditional variance: the asym- 45
HR
ENV
metric parameter of the GJR Model (the so-called ‘leverage CS
effect’ parameter) and ARCH and GARCH parameters CG
40
(respectively γiGJR αiGJR and βiGJR of equation (3)). CIN
HRTS
– The average (daily) returns. This variable is included to test 35
Score

for a potential effect of SR dimensions on rentability.

– The average daily variance as an additional proxy for risk 30
(total risk).
To summarize, the equations model is formally stated as: 25

riskit, = β1 * Xi,t + β2 * MVi,t + β3 * Leveragei,t + Yeart + ηi + vi,t 20
i = 1:2082 ; t = 2004:2015 ; (10) 2004 2006 2008 2010 2012 2014 2016
X ∈[HR, ENV, BB, CG ,CIN, HRTS] Year
148 Management international / International Management / Gestión Internacional

TABLE 1b
Summary statistics: distribution of the sample by years and countries
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total
Australia 0 0 0 0 15 45 8 43 12 37 16 38 214
Austria 1 1 3 2 3 4 5 6 4 4 4 5 42
Belgium 3 6 2 6 1 8 8 5 6 5 9 6 65
Brazil 0 0 0 0 0 0 0 0 0 15 38 34 87
Canada 0 0 0 2 6 28 19 16 25 11 33 14 154
Chile 0 0 0 0 0 0 0 0 0 2 13 8 23
China 0 0 0 0 0 0 0 0 1 7 44 40 92
Colombia 0 0 0 0 0 0 0 0 0 3 7 7 17
Czech Republic 0 0 0 0 0 0 0 0 1 0 1 2 4
Denmark 4 0 6 2 4 5 2 7 3 5 5 3 46
Finland 1 5 5 6 7 9 11 5 11 6 9 8 83
France 12 25 15 15 13 18 24 15 19 20 16 24 216
Germany 13 17 18 17 17 23 26 21 20 23 20 33 248
Greece 3 4 3 5 2 7 0 7 0 3 0 0 34
Hong Kong 0 0 0 0 5 25 4 24 5 28 29 50 170
Hungary 0 0 0 0 0 1 0 0 0 2 3 2 8
India 0 0 0 0 0 0 0 0 0 17 43 44 104
Indonesia 0 0 0 0 0 0 0 0 0 10 18 20 48
Ireland 5 4 3 4 3 4 5 4 4 4 4 6 50
Italy 3 14 9 6 7 12 11 13 9 11 9 9 113
Japan 0 0 0 0 52 215 29 210 31 219 62 229 1047
Korea 0 0 0 0 0 0 0 0 0 0 1 2 3
Luxembourg 0 1 0 2 1 2 2 2 1 2 2 4 19
Malaysia 0 0 0 0 0 0 0 0 0 10 24 20 54
Mexico 0 0 0 0 0 0 0 1 0 7 17 16 41
Monaco 0 0 0 0 0 0 0 0 0 0 0 1 1
Morocco 0 0 0 0 0 0 0 4 2 8 0 7 21
New Zealand 0 0 0 0 1 3 2 1 2 1 3 2 15
Norway 1 4 5 1 7 7 6 9 2 8 3 8 61
Peru 0 0 0 0 0 0 0 0 0 1 2 2 5
Philippines 0 0 0 0 0 0 0 0 0 2 14 13 29
Poland 0 0 0 0 0 2 0 0 0 2 16 11 31
Portugal 2 3 2 5 0 6 1 3 2 0 2 0 26
Qatar 0 0 0 0 0 0 0 0 0 0 1 2 3
Russia 0 0 0 0 0 0 0 0 0 5 6 9 20
Saudi Arabia 0 0 0 0 0 0 0 0 0 1 0 0 1
Singapore 0 0 0 0 4 9 4 7 4 10 7 13 58
South Korea 0 0 0 0 0 0 0 0 0 22 51 45 118
South-Africa 0 0 0 0 0 0 0 0 1 17 28 37 83
Spain 7 11 9 15 6 17 9 13 9 11 11 10 128
Sweden 6 17 9 15 11 20 24 14 19 18 24 12 189
Switzerland 6 16 11 10 14 14 24 16 19 16 22 15 183
Taiwan 0 0 0 0 0 0 0 0 0 31 47 75 153
Thailand 0 0 0 0 0 0 0 0 0 8 17 13 38
The Netherlands 10 14 13 8 6 15 14 10 11 10 12 11 134
Turkey 0 0 0 0 0 0 0 0 0 6 18 22 46
United Arab Emirates 0 0 0 0 0 0 0 1 0 0 1 2 4
United Kingdom 50 60 44 44 51 72 75 61 65 59 65 58 704
United States of America 1 0 1 13 22 213 119 133 139 164 202 166 1173
Total 128 202 158 178 258 784 432 651 427 851 979 1158 6206
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective
with respect to the firm’s sector (the formula is not publicly
disclosed by VIGEO).
If SR commitment reduces risk, we should expect the fol-
lowing impacts:
– ARCH effect: the impact of SR ratings on αi of formula (3)
should be negative, recent chocks have a lesser effect on future
risk (better capacity of SR companies to absorb chocks),
– GARCH effect: the impact of SR ratings on βi of formula (3)
should be positive, the variance process is more stable in
time, risk should be easier to predict.
– Asymmetric effect: the impact of SR ratings on yi of formula
(3) should be negative. Indeed, a positive coefficient would
mean that impact of negative chocks on volatility increases
with good SR ratings. However, we expect the opposite
because good SR ratings may be perceived by equity holders
as a positive signal about the firm’s future risk.
Impact of SR dimensions on market risk
predictability
As previously stated, we use the DQT test to assess VaR accuracy
as a proxy of market risk predictability. We therefore observe
two scenarios: 1) either the DQT test accepts the null hypothesis
of adequate VaR prediction, or 2) the VaR prediction fails and
the model does not capture the return dynamics. We classify
as successful whenever the null hypothesis of the DQT test of
adequate modelling is accepted at a 5% confidence level. Thus,
for each firm and each year, we obtain a time-series of a binary
variable indicating success or failure regarding the VaR prediction.
Figure 2 presents a comparison of the ARMA-GARCH and
ARMA-GJR models using the DQ test. The classical GARCH
obtains better results for the risk (VaR) of short positions and
GJR for the risk of long positions. In the empirical analyses,
we will therefore use the classical GARCH model when the
dependant variable is the “short VaR” and the GJR model when
the dependent variable is the “long VaR”. Note that the per-
centage of success is quite low during crisis periods (2008 and
2011, crisis in the euro-zone) meaning that prediction quality
of time series models deteriorate in period of crisis when risk
predictability is more needed.
To evaluate the relationship between SR dimensions and
this VaR accuracy, we use a fixed-effects logistic regression.
Comparison of the GARCH and GJR time series models in the case of long and short portfolios
Short VaR
1 1
% Suceess (DQT)
GJR
0.9 GARCH
0.8
0.7
0.6
2004 2006 2008 2010 2012 2014
Year
10. Equation (11) (fixed effect model) is a simplified version of the conditional fixed effect model that we actually used in our empirical work. The choice of the
conditional model is justified to take into account identification problems.
149
The dependent variable (RQP, risk quality prediction) can take
only two states: 0 for failure in predicting VaR or 1 for success
in predicting VaR. The logistic model is therefore suitable. The
dependent variable is derived of the DQT obtained via the
ARMA-GARCH to evaluate short position and via the ARMA-
GJR to evaluate long position.
Formally the fixed-effects logit model is10,
P(RQPi,t ≠ 0|X it = F(αi + X itγ)
(11)
i = 1: 2082 t = 2004; 2015
exp (z)
where F is the cumulative logistic distribution F (z) =
1+exp (z)
X i,t is a vector of observations on the explanatory variables
(SR dimensions and overall rating) and is a vector of unknown
coefficients. The same explanatory variables as in the non-logit
panel case are included. Estimation is implemented using Matlab
and Ox programming language (Doornik, 2007) with G@rch
(Laurent and Peters, 2002).
Empirical Results
SR ratings and market risk characteristics
Table 2 presents the results of the effect of the SR ratings on
the VaR of long and short positions and on the parameters of
the GJR GARCH model. We only report regressions that have
a significant SR coefficients.
Empirical value at risk - market risk
In terms of the Empirical Value at Risk (column (8) and (9)
of table 2), the size (Market Capitalization) tends to reduce
market risk since it lowers positive VaR (significantly) and
increases negative VaR. Conversely, and as expected, the debt
ratio (Leverage) increases market risk since it is positively related
to extreme variation (increasing positive VaR and lowering
negative VaR). SR involvement (measured by the overall SR
rating) tends to reduce risk because coefficient is significantly
positive for negative VaR and negative significant for positive
VaR. We do not find significant impact of SR dimensions on
positive or negative VaR. SR commitment seems to have a
synergetic effect: it is only when the company is engaged in
a global SR implementation (and not particularly specific for
dimensions) that the impact on risk reduction is significant.
FIGURE 2
Long VaR
% Suceess (DQT)
GJR
0.8 GARCH
0.6
0.4
0.2
2016 2004 2006 2008 2010 2012 2014 2016
Year
150 Management international / International Management / Gestión Internacional

TABLE 2
SR scores and market risk characteristics: Fixed effect panel data model
(1) (2) (3) (4) (5) (6) (7)
ARCH(α) ARCH(α) ARCH(α) ARCH(α) ARCH(α) GARCH(β) GARCH(β)
Overall SR Score

HR -0.00177**
(-2.54)

ENV -0.00118*
(-1.86)

BB -0.00220*** 0.00303**
(-3.11) (2.17)

CG 0.00318**
(2.05)

CIN -0.00100**
(-2.12)

HRTS -0.00145*
(-1.70)

2004 0.0134** 0.0135** 0.0130** 0.0137** 0.0134** -0.0355*** -0.0357***

(2.11) (2.15) (2.04) (2.18) (2.10) (-3.22) (-3.23)

2005 0.0136*** 0.0140*** 0.0135*** 0.0142*** 0.0139*** -0.0216*** -0.0218***

(3.49) (3.69) (3.51) (3.71) (3.52) (-3.56) (-3.60)

2006 0.0150*** 0.0154*** 0.0149*** 0.0155*** 0.0152*** -0.0256*** -0.0256***

(3.48) (3.63) (3.48) (3.62) (3.52) (-3.76) (-3.74)

2007 0.0166*** 0.0167*** 0.0164*** 0.0169*** 0.0167*** -0.0384*** -0.0384***

(4.36) (4.47) (4.36) (4.48) (4.41) (-4.68) (-4.63)

2008 0.00903*** 0.00916*** 0.00891*** 0.00930*** 0.00911*** -0.0191*** -0.0192***

(4.33) (4.45) (4.32) (4.51) (4.27) (-3.46) (-3.63)

2009 0.00363* 0.00370* 0.00351* 0.00371* 0.00362* -0.00254 -0.00275

(1.84) (1.93) (1.79) (1.91) (1.81) (-0.88) (-0.96)

2010 0.00333 0.00348 0.00325 0.00349 0.00336 -0.00310 -0.00300

(1.12) (1.18) (1.10) (1.18) (1.13) (-0.69) (-0.66)

2011 0.00308 0.00317 0.00289 0.00332 0.00306 -0.00665** -0.00681**

(1.41) (1.49) (1.33) (1.54) (1.38) (-2.24) (-2.31)

2012 0.000904 0.000966 0.000826 0.00106 0.000942 -0.00105 -0.000866

(0.44) (0.49) (0.41) (0.53) (0.46) (-0.28) (-0.22)

2013 0.00309* 0.00314* 0.00295* 0.00324* 0.00307* -0.00277 -0.00292

(1.83) (1.90) (1.76) (1.92) (1.80) (-1.12) (-1.18)

2014 0.000557 0.000626 0.000547 0.000667 0.000588 0.00162 0.00173

(0.42) (0.48) (0.41) (0.51) (0.44) (0.60) (0.63)

MV -0.00459 -0.00462 -0.00466 -0.00460 -0.00468 0.00678 0.00701*

(-1.29) (-1.29) (-1.31) (-1.29) (-1.31) (1.63) (1.67)

Leverage 0.00687 0.00689 0.00698 0.00684 0.00692 -0.00338 -0.00318

(1.41) (1.41) (1.42) (1.41) (1.42) (-0.95) (-0.88)

Const. 0.105*** 0.103*** 0.107*** 0.102*** 0.105*** 0.812*** 0.809***

(2.76) (2.79) (2.82) (2.74) (2.72) (18.19) (17.92)
N 6195 6195 6195 6195 6195 6195 6195
r2 0.0479 0.0467 0.0494 0.0467 0.0473 0.0461 0.0460
r2 (b) 0.00423 0.00437 0.00393 0.00462 0.00410 0.000247 0.000480
r2 (o) 0.00262 0.00286 0.00235 0.00302 0.00263 0.0000592 0.0000139
F 6.556 6.549 6.487 6.636 6.457 5.839 5.842
Su 0.0580 0.0580 0.0580 0.0580 0.0580 0.0916 0.0917
Se 0.0230 0.0230 0.0230 0.0230 0.0230 0.0471 0.0471
Ng 2082 2082 2082 2082 2082 2082 2082
Min 1 1 1 1 1 1 1
Avg 2.976 2.976 2.976 2.976 2.976 2.976 2.976
Max 8 8 8 8 8 8 8
LL 15865.0 15861.2 15869.7 15861.1 15863.2 11422.9 11422.7
* p < 0.10, ** p < 0.05, *** p < 0.01.
r2, r2(b) and r2(o) denote, respectively, the within, between and overall r-squared. F is Fischer statistic and Su and Se are respectively the panel-level
standard deviation and standard deviation of vit. N, Ng, Min, Avg and Max refer, respectively, to the total number of observations,
^
the total number of groups,
the minimum, average and maximum number of groups. The dependent variables N-VaR, P-VaR, GJR, ARCH, GARCH, ( σ2  ) and E(r) refer respectively to the
negative empirical VaR, positive Empirical VaR, the asymmetry parameter of the GJR model, the ARCH coefficient, the GARCH coefficient, the (daily) variance
and the (daily) average returns. T-statistics are given in parentheses. LL is the log-likelihood. Standard errors are cluster–robust standard errors.
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective 151

TABLE 2
SR scores and market risk characteristics: Fixed effect panel data model
(8) (9) (10) (11) (12) (13) (14)
σ2
^
NegVar PosVar GJR(γ) ARCH(α) GARCH(β) E(r)
Overall SR Score 0.0000446* -0.0000564** -0.0000176 -0.000234*** 0.000389*** -0.00000127 -0.00000443
(1.71) (-2.13) (-0.22) (-3.07) (2.63) (-1.06) (-1.42)

HR

ENV

BB

CG

CIN

HRTS

2004 0.0101*** -0.0106*** 0.0106** 0.0113* -0.0325*** -0.000272*** -0.000128

(8.52) (-8.97) (2.50) (1.76) (-2.88) (-4.43) (-0.93)

2005 0.0136*** -0.0119*** -0.00312 0.0116*** -0.0180*** -0.000336*** 0.000337***

(15.10) (-13.36) (-0.95) (2.94) (-2.88) (-7.51) (2.85)

2006 0.00690*** -0.00547*** -0.00361 0.0138*** -0.0236*** -0.000162*** 0.000395***

(9.62) (-8.02) (-0.95) (3.16) (-3.30) (-4.89) (3.90)

2007 0.00377*** -0.00417*** -0.000929 0.0154*** -0.0365*** -0.000167*** -0.000221**

(4.78) (-5.64) (-0.33) (4.08) (-4.34) (-4.81) (-1.98)

2008 -0.0270*** 0.0220*** 0.00770*** 0.00829*** -0.0179*** 0.000855*** -0.00201***

(-30.05) (26.73) (3.66) (3.92) (-3.17) (19.93) (-20.04)

2009 -0.0122*** 0.0134*** -0.000718 0.00304 -0.00165 0.000379*** 0.000606***

(-22.05) (23.05) (-0.50) (1.55) (-0.55) (14.57) (8.50)

2010 0.00426*** -0.00445*** 0.00273 0.00321 -0.00294 -0.000170*** -0.0000245

(7.50) (-8.13) (1.49) (1.09) (-0.66) (-6.41) (-0.29)

2011 -0.00316*** 0.00111*** 0.00731*** 0.00270 -0.00620** 0.0000699*** -0.000916***

(-6.56) (2.69) (5.58) (1.25) (-2.06) (3.68) (-14.47)

2012 0.00629*** -0.00463*** 0.00322* 0.000349 -0.000168 -0.000170*** 0.000285***

(11.82) (-8.60) (1.93) (0.17) (-0.04) (-8.00) (4.14)

2013 0.00317*** -0.00209*** 0.00104 0.00292* -0.00262 -0.0000485*** 0.000528***

(8.15) (-5.93) (0.84) (1.75) (-1.05) (-2.82) (10.30)

2014 0.00767*** -0.00684*** -0.000984 0.000374 0.00195 -0.000203*** 0.000288***

(19.04) (-17.11) (-0.91) (0.28) (0.72) (-12.86) (5.08)

MV 0.00285*** -0.00620*** 0.00109 -0.00460 0.00667 -0.0000949*** -0.00102***

(4.72) (-10.23) (0.65) (-1.29) (1.60) (-2.63) (-12.21)

Leverage -0.00237* 0.00186 -0.00138 0.00699 -0.00346 0.000114 -0.000173*

(-1.66) (1.33) (-0.85) (1.42) (-0.95) (1.50) (-1.75)

Const. -0.0595*** 0.0949*** 0.0514*** 0.107*** 0.809*** 0.00140*** 0.0108***

(-9.09) (14.51) (2.88) (2.87) (18.41) (3.59) (11.96)
N 6195 6195 6195 6195 6195 6195 6195
r2 0.566 0.526 0.0259 0.0486 0.0463 0.367 0.394
r2 (b) 0.0323 0.000764 0.00351 0.00144 0.0000411 0.0331 0.00949
r2 (o) 0.228 0.0603 0.000226 0.000356 0.00119 0.160 0.0396
F 162.5 142.4 9.928 6.957 6.770 72.43 126.6
Su 0.0112 0.0174 0.0568 0.0574 0.0908 0.000366 0.00253
Se 0.00804 0.00799 0.0222 0.0230 0.0471 0.000363 0.000997
Ng 2082 2082 2082 2082 2082 2082 2082
Min 1 1 1 1 1 1 1
Avg 2.976 2.976 2.976 2.976 2.976 2.976 2.976
Max 8 8 8 8 8 8 8
LL 22371.7 22409.3 16083.1 15867.4 11423.7 41566.6 35300.9
152 Management international / International Management / Gestión Internacional
As stated above, good global SR rating (overall rating) reduces
significantly the VaR of short and long portfolios. Nevertheless,
the impact of good global SR rating on variance is also negative
but not significant (table 2, column 13). These results tend to
show that SR strategy is more efficient in reducing extreme risks
(kurtosis) than global risk (variance). Furthermore the impact
of global rating on expected returns is negative (meaning, fol-
lowing equations (4) and (5), that it increases the long position
risk and decreases the short position risk) but non-significant.
In consequence, our VaRs do not suffer of a potential mean
effect (table 2, column 14).
Asymmetric parameter 11
Regarding the asymmetric parameter of the GJR Model, we
observe a non-significant relation between the overall SR rat-
ing and the asymmetry coefficient (column (10) in table 2).
This finding indicates that SR involvement has no perceivable
impact on the leverage effect. Leverage has the same effect
on stock prices behaviour for high and low SR companies.
This result has a practical consequence because it means that
high SR companies cannot increase their leverage expecting a
dampening effect of CSR on the asymmetric effect.
GARCH parameters
Finally, regarding the conditional variance process, we observe
that BB (Business Behaviour) and CG (Corporate Governance)
dimensions have a positive (significant) effect on the GARCH
parameters, indicating higher persistence in the variance (col-
umn (6) and (7) in table 2)12. The coefficient is also positive and
significant for the overall SR rating (column (12) in table 2).
Volatility is therefore more stable for companies with higher
SR ratings. Correspondingly, we observe negative significant
coefficients for HR (Human Resources), ENV (Environment),
BB (Business Behaviour), CIN (Community Involvement), and
HRTS (Human Rights at Workplaces) dimensions (column (1)
to (5) in table 2) for the ARCH effect. These results indicate that
highly ranked companies in terms of each of these SR dimen-
sions have a variance process that is less affected by shocks
than low ranked companies. The overall SR rating has also a
negative significant impact on the ARCH effect (column (11)
in table 2) confirming that companies with high SR ratings are
less sensitive to shocks.
SR ratings and market risk predictability
The fixed-effects logistic regression results corresponding to
equation (11) are reported in table 3 for the VaR of long and
short positions using respectively the GJR and classical GARCH.
Firm size (measured by Market Capitalization) has a signifi-
cant (at 1%) impact on the probability that the VaR methodology
adequately predicts extreme variations for ‘short’ positions. This
indicates that the probability of a correct VaR prediction for
a large company is greater than for a small one. The positive
and significant effect of the market capitalization variables also
11. The distribution of the ARCH, GARCH and Asymmetric (GJR) coefficients are given in Appendix 3. Summary statistics of the estimated coefficients are
given in Appendix 4.
12. As a robustness check, we conduct a similar empirical analysis on a sample where we suppose that the Vigeo ratings remains valid two years after its first
computation unless another rating was calculated during this period. In this case, we also find that HR (Human Resources) has a significant positive effect on
the GARCH coefficient.
indicates that VaR prediction accuracy increases with firm size.
Concerning Global SR ratings, we observe that its impact on
risk prediction quality is positive but not significant (columns
(2) to (5) in table 3). We report only one significant result in
the table 3 for the SR dimensions: ENV (Environment) has a
negative impact on the prediction of the short VaR (column
(1) of table 3). During the crisis period the market risk predict-
ability deteriorated as indicated by the negative and strongly
significant coefficients of the year 2008.
Discussion and Conclusion
This paper examines the relationship between SR dimensions
or practices and financial risk (measured by VaR) in an inter-
national context. The originality of this paper is in simultaneously
proposing a measure of risk (Value-at-Risk) with a measure of
the impact of SR Vigeo dimensions on the risk dynamics of
stock returns and risk predictability.
While extant ‘CSR-Risk’ related literature focuses on the
measure of this relationship, it has thus far been silent on the
effect of SR dimensions on risk predictability and risk dynamics.
Indeed, although knowledge on the relation between risk level
and SR dimensions is certainly valuable, risk managers tend
to take this risk into account with tools such as VaR models.
Therefore, in addition to measuring the level of risk, evaluating
the relation between SR dimensions and risk model character-
istics and accuracy would also seem relevant.
As a main contribution, we find that high-rated companies
considering SR global rating (defined as ‘Overall SR Rating’)
appear to be less risky (in terms of downside risk level meas-
ured by VaR) than low-rated companies, dampen the effect of
negative returns on volatility and soften volatility movements.
This reinforces the argument that SR considerations allow
more accurately anticipating and managing the social risk of a
company and thus the financial risk through what Kurtz (2002)
termed the ‘information effect’ (better control of environmental
and social risks lead to better anticipating financial risk).
When we decompose the results by SR dimensions for the
estimated risk characteristics, we find that high-rated com-
panies in HR (Human Resources), ENV (Environment), BB
(Business Behaviour), CIN (Community Involvement), and
HRTS (Human Rights at Workplaces) dimensions better absorb
volatility shocks than low-rated companies in the same dimen-
sion. Our results are therefore in line with the results of Bouslah
et al. (2013) on the systematic risk of companies and reinforced
by Boutin-Dufresne and Savaria (2004: 60) for HRTS, CIN, HR
and BB dimensions. For the human rights issues (HRTS), the
authors state that “the risks associated with the quality of life in
the workplace at local and international levels are the loss of prof-
itability resulting from, e.g., strikes, legal actions related to work
safety, or sweat shop issues”. Concerning the community, social
and commercial issues (CIN, HR and BB), we are online with
the fact that “by its involvement in local communities through
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective 153

TABLE 3
SR scores and market risk predictability: Conditional fixed-effects logit model
(1) (2) (3) (4) (5)
DQT(GARCH β) DQT(GARCH β) DQT(GARCH β) DQT(GJR γ) DQT(GJR γ)
Short Short Long Short Long
Overall SR Score 0.00316 0.00883 0.00745 0.00849
(0.36) (1.15) (0.94) (1.07)

ENV -0.149*
(-1.79)

2004 1.258*** 1.358*** 1.236*** 0.705** 0.930**

(3.25) (3.39) (3.37) (2.25) (2.56)

2005 -0.128 -0.0291 1.011*** -0.0619 0.884***

(-0.48) (-0.10) (3.53) (-0.24) (2.94)

2006 -0.493* -0.425 0.339 -0.657*** 0.360

(-1.85) (-1.53) (1.35) (-2.68) (1.35)

2007 0.111 0.162 -0.126 -0.0462 -0.282

(0.40) (0.58) (-0.57) (-0.19) (-1.23)

2008 -0.512** -0.464** -2.055*** -0.343* -2.060***

(-2.35) (-2.10) (-10.00) (-1.67) (-10.09)

2009 0.101 0.135 0.600*** -0.145 0.644***

(0.61) (0.80) (4.45) (-0.97) (4.51)

2010 0.672*** 0.687*** 0.667*** 0.518** 0.620***

(2.94) (2.99) (3.40) (2.56) (3.02)

2011 0.844*** 0.870*** -1.372*** 1.044*** -1.154***

(4.38) (4.49) (-9.94) (5.70) (-8.46)

2012 0.863*** 0.892*** 1.460*** 0.773*** 1.300***

(3.50) (3.58) (6.76) (3.56) (5.77)

2013 0.0298 0.0542 0.775*** -0.0377 0.743***

(0.20) (0.36) (5.97) (-0.28) (5.51)

2014 0.318* 0.339** 0.525*** 0.532*** 0.536***

(1.85) (1.97) (3.67) (3.33) (3.60)

MV 1.257*** 1.251*** -0.195 1.136*** -0.0780

(7.83) (7.80) (-1.44) (7.98) (-0.56)

Leverage -0.0529 -0.0623 -0.0731 -0.0571 -0.251

(-0.30) (-0.36) (-0.30) (-0.34) (-0.80)
N 2563 2563 3952 3083 3684
Ng 616 616 949 741 887
Min 2 2 2 2 2
Avg 4.161 4.161 4.164 4.161 4.153
Max 8 8 8 8 8
Chi2 141.8 138.8 684.9 196.3 573.1
LL -841.4 -842.9 -1184.9 -1045.4 -1108.1
* p < 0.10, ** p < 0.05, *** p < 0.01.
N, Ng , Min, Avg and Max refer, respectively, to the total number of observations, the total number of groups, the minimum, average and maximum number of
groups. A large number of groups has been dropped because some groups have the same dependent variable (vector with only one or zero values) whereas
the estimation required at least two different outcomes. Chi2 and LL are respectively the statistic of the chi2 test and the log-likelihood of the model.
t statistics are given in parentheses. The dependent variables DQT(GARCH) SHORT and DQT(GJR) LONG are binaries variable that indicate success (1) or
failure (0) of the null of adequate VaR modelling based on the DQT test using results of the GARCH models for short position VaR and of the GJR model for the
long position VaR (found to be the most appropriate model for each position).
154 Management international / International Management / Gestión Internacional
charity, for instance, the firm develops a better understanding of
its market while the same forging a sustainable relationship with
its stakeholders, thus possibly avoiding a commercial boycott in
the future” (Boutin-Dufresne and Savaria, 2004: 60). The auth-
ors add that the more the firm is engaged in its daily activities
into ethical and social issues, whether internal (employees for
instance) or external (community), the lower the chances that
the company will face legal actions or large-scale boycotts in
the future. For the environmental issues (ENV), our findings
confirm that enhancing environmental performance improves
the productivity of the firm and its competitiveness in the long
term as supported by Porter hypothesis (1991), and so on its
financial risk.
Finally, concerning the risk predictability, we find only one
negative significant relationship between the ‘Environment’
dimension and the statistical quality of the prediction of stock
return risk (measured by VaR) for short sales. In consequence,
it appears that from a practical point of view of risk manager,
SR dimensions could not help them to better predict risk of
stocks return using GARCH like time series models.
The theoretical and managerial implications of this research
are multiple. From a theoretical viewpoint, our study confirms
the results observed between SR dimensions and total, specific
and idiosyncratic risks, starting to bridge the gap in the sphere of
‘CSR-downside risk’ using the VaR approach. Our methodology
based on the study of risk dynamics and predictability enables
going beyond the single ‘CSR-risk’ measure to understand how
SR dimensions can absorb volatility shocks or dampen the
impact of negative returns while considering the quality of the
VaR prediction. Moreover, we consider that our results confirm
that SR strategies could act as a way to include stakeholders
utilities in the corporate objective function (to reduce risk in
our perspective) and to integrate that they are not only under
constraint of shareholder’s utility function as stated by Jensen
(2001). From a managerial perspective, companies are encour-
aged to adopt SR strategies that could finally positively act on
their risk management processes, as they could be a source of
interest for portfolio managers and investors.
However, in terms of robustness, this study requires fur-
ther evidence. Indeed, the question about the influence of SR
commitment on company risk remains central and decisive to
answer issues about profitability or performance. As MacGuire
et al. (1988: 868) state: “… rather than looking for increased prof-
itability from socially responsible actions, managers and those
interested in the financial impact of social responsibility might
look toward reduced risk. Since high risk must be balanced by
high returns, firms with low social responsibility should earn
high returns to justify the increased risk”.
Better risk management always entails more profitability
in the long term, yet the inverse is not always true. The lack of
conclusions in this sphere and especially in risk management
through downside risk requires future research to encourage
and nourish this debate, testing other data, markets and periods,
to provide practitioners the ability to consider SR practices in
their risk management processes.
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156 Management international / International Management / Gestión Internacional

APPENDIX 1
Vigeo Social Ratings
The Vigeo frame of reference has 38 generic criteria divided into 6 distinct domains:
1. Human Resources: constant improvement of professional and labour relations as well as working conditions.
2. Environment: protection, safeguarding, prevention of attacks on the environment, implementation of an adequate managerial strategy,
ecodesign, protection of biodiversity and reasonable control of environmental impacts on the overall lifecycle of products and services.
3. Corporate Governance: efficiency and integrity, insuring the independence and effectiveness of the Board of Directors, effectiveness
and efficiency of audit and control systems and particularly social responsibility risks, respect of shareholder rights and especially
minorities, transparency and moderation in executive remuneration.
4. Community Involvement: effectiveness, managerial integration of commitment, contribution to economic and social development
of the territories of establishment and their human communities, concrete commitment in favour of controlling the societal effects
of products and services, transparent and participative contribution to causes of general interest.
5. Business Behaviour: taking into account clients’ rights and interests, integrating social and environmental standards both in the
selection of suppliers and in the overall supplying chain, efficient prevention of corruption and respect of competition laws.
6. Human Rights at Workplaces: respect of trade union freedom and promoting collective negotiation, non-discrimination and equality,
eradication of banned working practices (child and forced labour), preventing inhumane or humiliating treatments such as sexual
harassment, protecting private life and personal data.
More precise definitions of these criteria are available on the Vigeo website: http://www.vigeo-eiris.com/fr/.

APPENDIX 2
Vigeo Social Ratings

Hausman test

CHI2 P
1 92,21037044 7,34071E-20
2 82,69817626 8,09406E-18
3 57,93402803 2,62897E-13
4 60,7557881 6,41281E-14
5 58,57337651 1,90965E-13
6 59,02917464 1,52047E-13
7 24,6142809 4,51936E-06
8 34,56403804 3,12259E-08
9 34,65399141 2,98525E-08
10 36,46823838 1,2051E-08
11 35,74277246 1,73203E-08
12 35,28148497 2,18134E-08
This table displays results of the Hausman test applied on the regression presented in table 2. The Hausman test has for null hypothesis that the
random effect model should be preferred, p-values are below 0.01 indicating that the alternative, the fixed effect model should be employed.
The Effects of Socially Responsible Dimensions on Risk Dynamics and Risk Predictability: A Value-at-Risk Perspective 157

APPENDIX 3
Frequencies of ARCH, GARCH and GJR coefficients

Garch Arch
1500 800

600
1000
400
500
200

0 0
0 0.5 1 0 0.5 1
Gjr
800
All
Significant
600

400

200

0
-0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1

This figure displays the distribution of the GARCH term (upper left panel), of the ARCH term (upper right panel) and of the asymmetry parameter of the
GJR model (lower panel). All coefficients are displayed.

APPENDIX 4
Summary statistics of the estimated coefficients

Mean p25 Median p75 Std N

ARCH (α) 0,05841 0,02633 0,04789 0,07357 0,05388 6206
GARCH (β) 0,88431 0,86256 0,90369 0,93282 0,08491 6206
GJR (γ) 0,06295 0,03545 0,05787 0,08601 0,05386 6206
DQT - Short 8,52293 0,27570 1,01119 3,24899 42,44845 6206
DQT - Long 12,02275 0,27570 1,26986 10,42402 77,21839 6206
This table summarizes the estimates of the ARCH (α), GARCH (β), GJR (γ) - the asymmetry parameter of the GJR model and T-statistics of the Dynamic
Quantile test for Short and Long position.
Biographical Notes
Sébastien Chantelot, docteur en sciences économiques, est direc-
teur de La Rochelle Business School et Vice-Dean d’Excelia Group
en France. Ses travaux de recherche concernent l’étude des dyna-
miques organisationnelles à l’œuvre lors de la production et la
diffusion de l’innovation.
Sophie Casanova est maître de conférences en Entrepreneuriat à
l’Université de Montpellier (Institut Montpellier Management).
Elle est responsable pédagogique du Master 1 Entrepreneuriat. Ses
recherches portent principalement sur l’identification d’opportu-
nités d’affaires, les clusters et les pôles de compétitivité français.
Elle effectue ses travaux au sein des laboratoires de recherche MRM
Entrepreneuriat (Montpellier Research Management) et Labex
Entreprendre.
Karim Messeghem est professeur agrégé à l’Université de
Montpellier dans le domaine de l’entrepreneuriat et de la stratégie.
Il est directeur de la recherche de l’Institut Montpellier Management
et président du comité scientifique du Labex Entreprendre. Il codi-
rige le Master Management de projets pour la PME, le Master
Accompagnement entrepreneurial et l’Executive MBA Stratégie
de croissance des PME. Ses travaux de recherche portent sur
l’accompagnement entrepreneurial, l’opportunité entrepreneuriale
et les stratégies des PME. Il a publié plusieurs ouvrages et une
quarantaine d’articles dans des revues internationales comme
Small Business Economics, Journal of Small Business Management
et des revues francophones.
Sylvie Sammut est Professeur des Universités en Entrepreneuriat
et Management Stratégique à l’Université de Montpellier (Institut
Montpellier Management). Elle est directrice des études et directrice
adjointe de l’Institut. Elle est directrice du groupe de recherche
MRM Entrepreneuriat et co-directrice de la Chaire Jacques Cœur
du LabEx Entreprendre. Elle dirige plusieurs programmes de re-
cherche et a publié plus d’une centaine de contributions (ouvrages,
articles, communications). Co-rédactrice en chef de la Revue de
l’Entrepreneuriat et vice-présidente de l’Académie de l’Entrepre-
neuriat et de l’Innovation, elle est chargée de mission Entrepreneuriat
auprès du Président de l’Université de Montpellier.
Benjamin Taupin est maître de conférences en théorie des orga-
nisations au Conservatoire national des arts et métiers et membre
du laboratoire LIRSA (EA 4603). Il est docteur en sciences de
gestion de l’Université Paris-Dauphine. Ses recherches portent sur
les dynamiques organisationnelles contemporaines dans divers
secteurs (finance, disque, organisations internationales, tourisme,
etc.) et s’inspirent des apports des sciences humaines et sociales, no-
tamment la sociologie pragmatique française et la sociologie
néo-institutionnelle.
Bastien Nivet est Docteur en science politique, Professeur associé
à l’École de Management Léonard de Vinci (EMLV, Paris La
Défense), et chercheur associé à l’Institut de recherche stratégique
de l’École militaire (IRSEM, Paris). Il est aussi enseignant à Sciences
Po Paris. Ses travaux de recherche portent principalement sur
l’intégration européenne, et ses dimensions de politique étrangère,
de sécurité et de défense. Il est l’auteur de nombreux articles et
chapitres d’ouvrage sur ces sujets, ainsi que sur les enjeux et concep-
tualisations de la puissance dans les relations internationales.
191
Clément Renaud est post-doctorant à l’Institut for Area and Global
Studies de l’Ecole Polytechnique Fédérale de Lausanne. Ses travaux
se situent au croisement de l’anthropologie des techniques et
pratiques de visualisation des données numériques, et se centrent
notamment sur la question de l’innovation technologique et trans-
formations urbaines en Chine.
Valérie Fernandez est Professeur, Directrice du département de
Sciences Economiques et Sociales de Telecom ParisTech, laboratoire
de recherche de l’UMR i3 CNRS http://www.i-3.fr. Ses recherches
s’intéressent aux transformations socio-économiques et nouveaux
modèles d ’organisation por tées par les technologies
numériques.
Gilles Puel, géographe, professeur à l’Université de Toulouse Jean
Jaurès, spécialiste des problématiques reliant les technologies et
les territoires. Depuis 2000, il dirige le programme de Master en
Développement Territorial de l’Université de Toulouse. Titulaire
d’une HDR en géographie et aménagement, il effectue des recherches
au LEREPS et en tant que chercheur associé à Télécom ParisTech.
Zhen Feng est Professeur à l’Ecole d’architecture et de planification
urbaine de l’Université de Nankin en Chine. Ses travaux de recherche
portent sur l’impact des technologies d’information et de com-
munication sur l’espace urbain et les modèles de “ville
intelligente”.
Jean-Laurent Viviani est professeur de finance à l’Université de
Rennes 1. Il est responsable du master Finance parcours “Trésorerie”
à l’IGR IAE Rennes et co-directeur de la chaire “Nouveaux défis
de la banque : Responsabilité sociétale, Efficience et Risques”. Ses
recherches actuelles portent sur le financement de la chaîne logis-
tique, les risques et la gouvernance bancaire, la Responsabilité
Sociale de l’Entreprise et les décisions financières en
incertitude.
Malick Fall est maître de conférence en Finance à l’Université de
Rennes 1. Ses recherches sont principalement quantitatives et
portent autant sur la Finance de Marché que sur la Finance
d’Entreprise.
Christophe Revelli est professeur associé de finance responsable
et directeur académique du MSc Corporate and Sustainable Finance
de Kedge Business School. Il est également administrateur au
Forum pour l’Investissement Responsable (FIR, French SIF). Ses
cours et ses recherches s’inscrivent dans le champ de la finance
responsable, de l’approche critique de la théorie financière moderne
et de l’impact investing.
Anne Sachet-Milliat (Docteur en Sciences de Gestion, Habilitée
à Diriger des Recherches) est enseignant-chercheur en éthique des
affaires et responsable de l’axe de recherche “Management, stratégie
et transformations organisationnelles” à l’ISC Paris Business
School. Elle est également membre associé du GRANEM à l’Uni-
versité d’Angers. Ses recherches portent principalement sur les
dilemmes éthiques des managers, la déviance organisationnelle
- comportements non-éthiques et fraudes commis pour le compte
des entreprises- et les stratégies d’influence politique.
Karim Messeghem is a Professor of Strategic Management and
Entrepreneurship at the University of Montpellier and the vice-
dean for research at Montpellier Management Institute. He is also
the President of the scientific board of Laboratory of Excellence
on Entrepreneurship (LabEx Entreprendre). He co-directs the
Master Entrepreneurial Support, the Master Project Management
in SMEs and the Executive MBA on SMEs Growth Strategy. His
research focuses on entrepreneurial support, entrepreneurial op-
portunity and SME strategies. He has published several books and
40 articles in ranked journals as Small Business Economics, Journal
of Small Business Management, and in several French academic
journals.
Sylvie Sammut is Full Professor in Entrepreneurship and Strategic
Management at the University of Montpellier (Montpellier
Management Institute). She is Academic Director and Associate
Dean of the Institute. She is the director of the MRM Entrepreneurship
Lab and co-director of the Jacques Coeur Chair at LabEx
Entreprendre. She supervises research programs and has published
more than one hundred contributions (books, highlighted and
additional journal articles, communications). She is co-editor-in-
chief of the Revue de l’Entrepreneuriat and vice-president of the
Academy of Entrepreneurship and Innovation. She is in charge of
mission “entrepreneurship” for the President of the University of
Montpellier.
Benjamin Taupin is an associate professor of organization studies
at Conservatoire national des arts et métiers (CNAM) and research
member of LIRSA (EA 4603). He holds a PhD from Université
Paris-Dauphine. Benjamin devoted his work to the study of or-
ganizational processes in various fields of research (finance, music
industry, international organizations, tourism, etc.) drawing on
perspectives in social sciences such as the French pragmatist so-
ciology and neo-institutionalism. Bastien Nivet holds a PhD in
Politics, is Associate Professor at the École de Management Léonard
de Vinci (EMLV, Paris Defense), and Associate Researcher at the
Institute for Strategic Research of the Military School (IRSEM,
Paris). He is also a teacher at Sciences Po Paris. His research focuses
on European integration and its foreign policy, security and defense
dimensions. He is the author of numerous articles and book chapters
on these topics, as well as on the issues and conceptualizations of
power in international relations.
Clement Renaud is a post-doctoral researcher at the Institute for
Area and Global Studies at EPFL (Switzerland). His works stands
at the crossroads of the anthropology of technics and the practice
of data visualization, with a focus on technological innovation
and urban transformation in China.
Valérie Fernandez, Professor, Head of the Economics and Social
Sciences department at Telecom ParisTech, UMR i3 CNRS
http://www.i-3.fr. Her research interests in Economics and
Innovation Management concern managerial practices, mediated
collaboration and new organizational design. In collaboration
with industrial partners and international researchers, she examines
companies’ organizational transformations linked to digital
technology.
Gilles Puel, a geographer, full professor at University of Toulouse
Jean Jaurès, specializing in issues linking technologies and terri-
tories. He has directed the Master’s of IT program in Territorial
Development at the University of Toulouse since the year 2000.
He holds a French diploma to supervise doctoral students and also
conducts research at LEREPS and as an associate researcher at
Télécom ParisTech.
Zhen Feng, PhD, is a professor in the School of Architecture and
Urban Planning, Nanjing University, China. His main research
interests include the impacts of Information communication and
technology (ICT) on urban space and smart city theory.
Jean-Laurent Viviani is professor of Finance at University Rennes
1. He is head of the master “Cash Management” at IGR IAE Rennes
and co-head of the chair “New challenges for banks: Social re-
sponsibility, efficiency and risks”. His researches are focused on
the financing of supply chain, the risks and the banking govern-
ance, the Corporate Social Responsibility and the financial deci-
sions under uncertainty.
Malick Fall is lecturer in Finance at University Rennes 1. His
researches are mainly quantitative and involve financial markets
as well as corporate finance.
Christophe Revelli is associate professor of responsible finance
and head of the MSc Corporate and Sustainable Finance at Kedge
Business School. He is also board member at French Social
Investment Forum (French SIF). His courses and researches are
focused in the field of responsible finance, of the critical approach
of the modern financial theory and of impact investing.
Anne Sachet-Milliat (PhD in Management sciences, Habilitation
to supervise research) is a Business Ethics professor and head of
the research cluster “Management, strategy and organizational
change” at ISC Paris Business School. She is also an associate
member of the GRANEM at Angers University. Her research has
mainly focused on ethical dilemma at the workplace, organizational
deviance - unethical behaviors and corporate crime- and political
influence strategies.
Jacques Igalens is emeritus professor at Toulouse Capitole University
and President of the international social audit institute. He founded
the AGRH (French Association of Human Resources Management)
and created the ROR (Responsible Organization Review). He has
been dean of TBS (Toulouse Business School). He published, alone
or with co-authors, about thirty books and one hundred of papers
in scientific journals. His interests are in Human Resources
Management and Corporate Social Responsibility.
Raphaël Maucuer is an Associate Professor of Strategy at ESSCA
School of Management. He holds a PhD in Management Sciences
from the University of Paris-Dauphine. His research interests
include business models, strategic discourses and non-profit
organizations.
Alexandre Renaud is an Associate Professor of Strategy at EM
Normandie. He holds a PhD in Management Sciences from the
University of Paris-Dauphine. His research interests include stra-
tegic alignment, project management and information systems
reconfiguration.
Sébastien Chantelot, doctor en economía, es director de La Rochelle
Business School y vicedecano de Excelia Group en Francia. Sus
producciones (artículos y conferencias) conciernen las dinámicas
organizacionales que estimulan la producción y difusión de la
innovación.
Sophie Casanova es profesora de Emprendimiento en la Universidad
de Montpellier (Instituto Montpellier Management). Ella es la
gerente educativa del Master 1 Emprendimiento. Su investigación
se centra en la identificación de oportunidades de negocio, clusters
y polos de competitividad franceses. Trabaja en los laboratorios
de investigación “MRM Emprendimiento” (Montpellier Research
Management) y Labex Entreprendre.
Karim Messeghem es profesor titular de la Universidad de
Montpellier en el campo del emprendimiento y la estrategia. Es
director de investigación del Montpellier Management Institute
y presidente del comité científico del Labex Entreprendre. Es
co-director del Master Project Management para PYMES, Master
Business Support y Executive MBA Growth Strategy para PYMES.
Su investigación se enfoca en el acompañamiento empresarial, las
oportunidades empresariales y estrategias de las PYME. Ha pu-
blicado varios libros y cuarenta artículos en revistas internacionales
como Small Business Economics, el Journal of Small Business
Management y otras revistas francesas.
Sylvie Sammut es Profesor de Universidades en Emprendimiento
y Gestión Estratégica en la Universidad de Montpellier (Montpellier
Management Institute). Ella es Directora de Estudios y Directora
Adjunta del Instituto. Es directora del grupo de investigación MRM
Entrepreneuriat y codirectora de la Cátedra Jacques Coeur del
LabEx Entreprendre. Sylvie Sammut dirige varios programas de
investigaciónes y ha publicado más de cien contribuciones (libros,
artículos, comunicaciones). Coeditora en jefe de la Revue de l’En-
trepreneuriat y vicepresidenta de la Academie de l’Entrepreneuriat
et de l’Innovation, está a cargo de mision Emprendimiento con el
presidente de la Universidad de Montpellier.
Benjamin Taupin es profesor asociado de teoría de las organiza-
ciones en el Conservatoire national des arts et métiers (CNAM) e
investigador en el laboratorio LIRSA (EA 4603). Es también Doctor
en Gestión de la Universidad Paris-Dauphine. Sus investigaciones
se centran en el estudio de las dinámicas organizacionales con-
temporáneas en varios sectores (finanzas, industria discográfica,
organizaciones internacionales, turismo, etc.) y se basan en las
contribuciones de las ciencias humanas y sociales, especialmente
la sociología pragmática francesa y el neoinstitucionalismo.
Bastien Nivet es Doctor en Ciencias Políticas, Profesor Asociado
en la École de Management Léonard de Vinci (EMLV, Defensa de
París) e Investigador Asociado en el Instituto de Investigación
Estratégica de la Escuela Militar (IRSEM, París). También es
profesor en Sciences Po Paris. Su investigación se centra en la
integración europea y sus dimensiones de política exterior, segu-
ridad y defensa. Es autor de numerosos artículos y capítulos de
libros sobre estos temas, así como de los problemas y conceptua-
lizaciones del poder en las relaciones internacionales.
Clément Renaud es investigador postdoctoral. Su trabajo se en-
cuentra en la intersección entre la antropología de las técnicas y
las prácticas de visualización de datos digitales, centrándose en
particular en el tema de la innovación tecnológica y en el de las
transformaciones urbanas en China.
Valérie Fernández es profesora, Telecom ParisTech, UMR i3 CNRS
http://www.i-3.fr.. Su investigación se centra en las transformaciones
socioeconómicas y en los nuevos modelos de organización impul-
sados por las tecnologías digitales.
Gilles Puel, geógrafo, profesor, es un especialista en cuestiones
que vinculan tecnologías y territorios. Desde 2000, dirige el pro-
grama de master en Desarrollo Territorial de la Universidad de
Toulouse.
Zhen Feng es profesor en la Escuela de Arquitectura y Planificación
Urbana de la Universidad de Nanjing en China. Su investigación
se centra en el impacto de las tecnologías de la información y la
comunicación en el espacio urbano y en los modelos de “ciudad
inteligente”.
Jean-Laurent Viviani es profesor de finanzas en la Universidad
de Rennes 1. Está a cargo del master curso de finanzas “Tesorería”
en el IGR IAE Rennes y codirector de la cátedra “Nuevos desafíos
del banco: responsabilidad social, eficiencia y riesgos”. Su inves-
tigación actual se centra en las finanzas de la cadena de suministro,
los riesgos y la gobernanza bancaria, la responsabilidad social de
las empresas y las decisiones financieras en la incertidumbre.
Malick Fall es profesor de finanzas en la Universidad de Rennes
1. Su investigación es principalmente cuantitativa y se centra tanto
en las finanzas de mercado como en las finanzas corporativas.
Christophe Revelli es profesor asociado de finanzas responsables
y director académico del Master de Corporate and Sustainable
Finance en Kedge Business School. También es administrador en
el French Social Investment Forum (French SIF). Sus cursos e
investigaciones están en el campo de las finanzas responsables, el
enfoque crítico de la teoría financiera moderna y la inversión de
impacto.
Anne Sachet-Milliat (doctora en ciencias de gestion, aptitud legal
para dirigir investigaciones) es profesor-investigadora en ética de
los negocios y responsable del eje de investigaciones “Management,
estrategia y transformaciones organizacionales” en la ISC Paris
Business School. Tambien es miembro-socio del GRANEM en la
Universidad de Angers. Sus investigaciones consisten principal-
mente en los dilemas éticos de los dirigentes, de la desviacion
organizacional, -conductas éticas y engaños hechos por cuenta de
las empresas- y las estratégias de influencia politica.
Jacques IGALENS es profesor emerito de la Universidad de Toulouse
Capitole y Presidente del Instituto internacional del Audito Social.
Ha creado la AGRH (Asociacion francofona de Gestion en Recursos
Humanos) y creado la ROR (Revista de la Organizacion Responsable).
Ha sido director de TBS (Toulouse Business School). Ha publicado,
solo o en colaboracion, aproximadamente treinta obras y cien
articulos cientificos en la disciplina de la gestion de los recursos
humanos y de la responsabilidat social de la empresa.
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